Low-cost Hassle-free International Fund Transfer

I have paid more than my fair share of bank fees in doing international fund transfers over the years. The (transparent) transaction fees charged by banks have come down significantly in the last few years and are now usually a small component of the overall cost but the hidden fees, in the form of an exchange rate that can be between 2-4% from what one can find on XE.com, continues to be an issue. A bad exchange rate is a multiplicative cost, and a lowly 2% fee when applied to $100k is a non-negligible $2000.

I have been searching high and low for an alternative to banks and remitters like Western Union and I’m a little annoyed with myself that it has taken me such a long time but I think I have finally found a low-cost and hassle-free international fund transfer service that I can recommend: TransferWise.

TransferWise is a regulated peer-to-peer service. Whenever a customer wants to transfer a sum of money from country A to country B, TransferWise finds a matching transaction going in the reverse direction and then just settles the international transfer request with two domestic transfers, thus saving customers money. With a sufficiently large customer base, the matching can be done very quickly. This, coupled with fast domestic interbank settlement now available in many countries, allow TransferWise to offer effectively the instantaneous exchange rate available from XE.com for many if not all transfers. I transferred funds from Singapore to Australia 3 times in the last week and, each time, I got the exact instantaneous rate available on XE.com.

TransferWise also appears to have a decent KYC (Know-Your-Customer) program, which is not surprising given that it’s regulated by ASIC in Australia and, I presume, equivalent agencies in other countries. It took me very little time to set up an account on TransferWise.com, but the identity-verification process took two working days, with back-and-forth emails culminating in a request for me to send a selfie with me holding my passport photo page next to my face. 😉

TransferWise’s peer-to-peer system reminds me of the Hawala system used in some Arabic and South East Asian communities to do low-cost and largely untraceable international money transfers. I had assumed that TransferWise transactions are similarly untraceable to financial intelligence agencies worldwide but it turns out I was wrong on that. In Australia at least, TransferWise is regulated by AUSTRAC and they report international fund transfers in and out of Australia, even though the international fund transfers never actually happened but are simulated by two equivalent domestic transfers. This gives further reassurance that TransferWise is a legitimate business not subject to systematic money-laundering and terrorism-financing abuse.